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Lenders, colleges accused of kickbacks

By ASSOCIATED PRESS
Published March 17, 2007

ALBANY, N.Y. - New York's attorney general has accused colleges across the country of taking kickbacks from student loan companies and reaping other benefits while making it harder for students to get better deals on their loans.

New York Attorney General Andrew Cuomo said Thursday an investigation he began last month into the $85-billion student loan industry found numerous arrangements made to benefit schools and lenders over the students. In some cases, it found that lenders provided all-expense-paid trips for college financial aid officers to exotic locations in return for directing students to the lenders.

Cuomo's office is investigating at least six lenders: SLM Corp. (commonly known as Sallie Mae), Nelnet Inc., Education Finance Partners Inc., EduCap Inc., the College Board and CIT Group Inc.

Cuomo said he is investigating at least 100 schools. No charges or lawsuits have been filed.

Investigators found that many colleges have established "preferred lender" lists and entered into revenue sharing and other financial arrangements with those lenders. Some colleges have "exclusive" preferred lender agreements with the companies.

Cuomo says such arrangements are deceptive and anti-competitive. He said the kickbacks he has uncovered could be illegal.

Representatives for the lenders said their companies were cooperating with investigators and denied any wrongdoing.

[Last modified March 17, 2007, 02:03:39]